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UK Q1 trade deficit widens to biggest since 2008

Britain's trade deficit widened in the first quarter of 2016 to its biggest since the early days of the financial crisis, adding to signs that global weakness is weighing on the economy.

PHOTO: REUTERS

[LONDON] Britain's trade deficit widened in the first quarter of 2016 to its biggest since the early days of the financial crisis, adding to signs that global weakness is weighing on the economy.

The shortfall in the first three months of the year widened to 13.273 billion pounds from 12.205 billion pounds in the last three months of 2015, its biggest for any calendar quarter since the first quarter of 2008, the Office for National Statistics said.

The deficit in goods alone widened to its highest since comparable records began in 1998 at 34.694 billion pounds.

Figures for March alone showed some improvement with the deficit in the trade in goods narrowing a bit to 11.204 billion pounds, slightly under economists' forecasts for 11.3 billion pounds in a Reuters poll.

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British economic growth slowed to a quarterly rate of 0.4 per cent in the first three months of 2016, down from 0.6 per cent in the last three months of 2015, and the ONS said trade would be a drag over the period.

Tuesday's figures showed that goods export volumes in the first quarter of 2016 slipped by 0.1 per cent, a smaller decline than at the end of 2015, while goods imports rose by 1.5 per cent.

China's economic slowdown has hit global trade since the middle of last year, and Markit's survey of British manufacturers has shown lower export orders every month so far this year - the longest run of falls in three years.

Separate figures on industrial export orders from the Confederation of British Industry have shown a slightly more robust trend, however.

Britain's large current account deficit hit a record 7.0 per cent of the economy in late 2015, which the Bank of England has said potentially leaves Britain vulnerable if the country votes to leave the European Union in a referendum on June 23.

However much of the deficit is due to the weak performance of British overseas investments, rather than its trade deficit.

Brent crude oil prices touched their lowest level since 2003 in January, weighing on the value of British exports, though they have since recovered.

Lower oil prices tend to reduce Britain's trade deficit, as it is a net importer.

Sterling fell to its lowest since 2013 on a trade-weighted basis last month, but falls in the cost of British exports are typically slow to trigger a boost in foreign demand.